Cap and trade

• A jurisdiction's emissions are capped at certain level

  • Cap is set to tighten each year i.e. amount of allowable emissions decreases each year

    • Total allowances or permits to emit greenhouse gas emissions are generated

      • Total allowances equal to set cap

      • # of allowances decreases each year

    • Permits are distributed to emitters

      • Free of charge/grandfathered

      • Auctioned

    • Trading system set up

      • Allowances traded

    • Revenues

      • If auctioned, revenues are

        • Used for govt programs

        • Returned to households and/or corporations

“Cap and Trade 101” video by Next 10 describes the California cap and trade system.